The producer price index (PPI), released last week, rose an annual 10,3% in March from 9,5% in February, with imported and domestically produced goods prices rising 9,9% and 10,5% respectively, from 9,7% and 9,4% in February.
The upside surprise on PPI inflation was mainly due to higher food prices than expected. Agricultural food prices jumped 5,6% month on month and rose an annual 19,3%, from 15,8% in February.
Maize prices have increased strongly over the past few months in response to adverse weather and dwindling food stockpiles.
Higher raw food prices continued to be passed on to the manufacture level, where food prices increased 1,7% month on month and an annual 11,4% in March. Overall, this contributed 0,7% to the 1,2% rise in the PPI.
Meat prices increased 4,2% in March and an annual 12%, up from 11,4%. A number of large retailers have recently indicated that prices, especially food prices, are likely to increase further in the months ahead.
Most analysts and the Reserve Bank expect inflation to increase, with forecasts showing that CPIX (consumer inflation minus mortgage costs) is likely to breach the upper 6% limit of the target range in April and May.
The strong rise in food prices, through drought, and a resurgence in oil prices may keep CPIX above 6% for longer than was anticipated.
This breach should be relatively short-lived and inflationary pressures are forecast to ease later in the year.
Nedbank chief economist Dennis Dykes said the moderate tone of the recent monetary policy committee statement suggested the Bank held a similar view, focusing more on the medium to long-term inflation outlook, than the deterioration in the short term.
